Silke Goller from the editorial staff of the “Ostwestfälische Wirtschaft” (“East Westphalian Business and Economy“) spoke with our CFO Norbert Rotter about itelligence AG’s commitment and activities in Southeast Asia. Among other things, the reasons that it makes sense to be active in the Asian market, special features of that market, and related opportunities and risks are highlighted.

Silke Goller:

How did your commitment and work in Southeast Asia come about?

Norbert Rotter:

Our commitment in Southeast Asia is part of our global growth strategy. itelligence AG is represented around the world with over 30 subsidiaries in 22 countries and is one of SAP’s “Full Service Partners”. Therefore it is logical to invest in Southeast Asia. Ultimately we follow our customers, who see these countries (first) as a production location, but also, with ever-increasing interest, as a strong growth market.

We started in 2005 in Shanghai with the founding of our own new subsidiary. Today we are up to a total of three branch locations in China. In 2008 we opened our first Malaysian data center, in Cyberjaya, Malaysia.

Of course we receive a great dynamic advantage in the entire Asian region through our mother company NTT DATA, an IT System Integrator belonging to Japan’s NTT COM, which has transferred to us the responsibility for the SAP business in the Asian Pacific region. In the so-called Business Solution Group, in addition to China, we are looking at revenues of around 50 million Euros in Malaysia, Singapore and Australia.

Silke Goller:

Please give us three reasons why companies should be setting out on the long road toward finding openings in the Asian market.

Norbert Rotter:

The nations of Southeast Asia clearly belong among the growth markets of the future. It is not only about market size: the substantially younger age demographic of the population promises sustainable growth. Southeast Asia is trending ever more strongly in the direction of a consumer market. In the areas of education, health and infrastructure they have a lot of catching up to do. The basic societal conditions of almost all of the countries are good; the major urban centers, especially, are home to a broadly-based, well-educated middle class. All of this leads to a fast acceptance of new ideas, technologies and products. Last but not least, the label “Made in Germany” finds a positive resonance as regards products and services in Southeast Asia.

Silke Goller:

Which prevailing market conditions are in place in the Far East, and what do you admire about the Asian market??

Norbert Rotter:

We are talking about very dynamic markets, which we have to view very distinctly from one another. Besides the established examples such as Malaysia, Singapore or Thailand, countries like Vietnam, Indonesia and Myanmar are developing into markets with great opportunities. In the IT field as well, these countries are being used as so-called “offshore countries” due to the wage level, which at this point is still quite low, but in the long term they will be markets in which everyone is seeking an opening. All of these countries have young populations of avid consumers. The employees are characterized by a high degree of commitment and reliability.

Silke Goller:

What do you see as the greatest risks for mid-sized companies which want to produce in the Far East?

Norbert Rotter:

Aside from financial risks such as those having to do with currencies and inflation, quality risks are of major significance. In particular, in countries which are still in the early stages of economic development, energy supply and a lack of adequate infrastructure can create big problems. On must also adapt to a substantially higher rate of employee turnover. The bureaucracy, which is often quite cumbersome, is a serious drawback which leads to particular difficulties in investment- and business activities for foreign companies. In the final analysis it is crucial to have dependable partners and employees on-location, who understand the local customs.

Silke Goller:

How important is it to work with local experts?

Norbert Rotter:

As I mentioned before, native specialists and experts on-location are often the “Alpha and Omega” in projects. They can evaluate the local needs and have the necessary networking connections. We have had very good success when we have involved well-trained managers on-location who are familiar with our business model, and can painstakingly and carefully construct the foreign subsidiary with local employees.

Silke Goller:

What role does an Asian location play in the further development of your company?

Norbert Rotter:

In recent years our Asian business has grown very nicely and steadily. In the next five years we expect our revenues to continue increasing, and we plan to shoot for 20 percent of our revenues there, or around 200 million Euros. In addition, we will open up further locations such as India, the Philippines and Indonesia.

Silke Goller:

Do you see a potential for further growth in the ASEAN group of nations?

Norbert Rotter:

Absolutely. The reduction of customs- and trade barriers will further strengthen investment in the member nations. The creation of a free trade zone has made a major contribution to political stability. The planned ASEAN common market will represent a significant share of the world economy and an important – if not THE most important – market for German companies.

– written by Silvia Dicke, Head of Corporate Public Relations, itelligence AG –